Goldman Sachs Sets $120 Brent Bull Case for Q4 as EIA Forecasts $70 and Global Supply Runs 9.4 Million Barrels Per Day Below Pre-War Levels

Brent crude settled at $91.46 per barrel on the ICE exchange on Tuesday, placing the market squarely between two sharply divergent Q4 2026 forecasts. Goldman Sachs projects Brent could exceed $120 per barrel in the fourth quarter if Strait of Hormuz disruptions persist. The U.S. Energy Information Administration's July Short-Term Energy Outlook puts Q4 Brent at $70 per barrel, a $50 difference from Goldman's bull case.

Goldman's Bull Case: Hormuz Stays Constrained, Gulf Output Recovers Late

Goldman Sachs describes the $120 scenario as a risk case, not a baseline. Two conditions must hold: Hormuz flows remain constrained, and Gulf crude output achieves a full recovery only by end of 2027. The bank's base case remains $80 per barrel for Q4 2026 and $75 per barrel for 2027. Gulf flows have fallen to below 45% of pre-war levels, which Goldman described as creating "net upside risks" to its base forecasts.

Second-quarter inventory draws exceeded 3 million barrels per day globally, leaving OECD diesel inventories and Strategic Petroleum Reserve stockpiles at low levels. Those drawdowns amplify the price response to any further supply disruption. Brent at $91.46 already sits $11.46 above Goldman's own $80 base case, suggesting the market assigns a meaningful probability to the sustained disruption scenario.

EIA Projects Steep Q4 Decline on Expected Supply Recovery

The EIA's July 2026 Short-Term Energy Outlook forecasts Brent falling to $70 per barrel in Q4 2026. That figure is $15 per barrel lower than the agency's June STEO estimate, reflecting the Iran-U.S. conflict resolution announced on June 18, 2026. EIA projects oil inventories will build by an average of 2.7 million barrels per day in Q4 as Gulf production returns.

The EIA projects global oil consumption will fall by 1.2 million barrels per day on average in 2026, then rebound 2.0 million barrels per day in 2027 as prices decline and supply stabilizes. Full-year 2027 Brent is forecast at $65 per barrel in the EIA's July outlook. Brent averaged $103 per barrel in Q2 2026, per EIA data, underscoring how far prices must fall to reach the agency's Q4 target.

IEA: Global Supply Runs 9.4 Million Barrels Per Day Below Pre-War Levels

The International Energy Agency's July 2026 Oil Market Report found global oil supply rebounded 4.1 million barrels per day to 98.8 million barrels per day in June as partial resumption of Hormuz flows underpinned Gulf production recovery. World output remains 9.4 million barrels per day below pre-war levels despite that rebound. Supply tracked to decline an average of 3.7 million barrels per day to 102.6 million barrels per day for full-year 2026 under the IEA's central scenario.

The IEA projects 7.5 million barrels per day in additional supply expansion in 2027 if transit volumes improve on schedule. Annual demand contractions are expected to ease from 4.8 million barrels per day in Q2 2026 to 1.7 million barrels per day in Q3, then flip positive in Q4. Those supply and demand trajectories underpin the EIA's $70 Q4 price path.

The Market's Current Implied Position

Goldman Sachs published its $120 bull case as Iran exited the 31-day Hormuz ceasefire, sending Brent higher. Oil Authority's earlier analysis documented the price surge to $91.17 that followed the ceasefire exit. Brent has since edged higher to $91.46, reinforcing the market's signal that supply risk remains elevated well above either forecaster's Q4 base case.

The gap between the EIA's $70 Q4 target and today's $91.46 spot price represents a $21.46 per barrel premium the market is placing on continued supply risk. If the EIA's supply recovery scenario materializes on schedule, that premium would erode by Q4 through inventory builds and returning Gulf production. Should Goldman's Hormuz disruption scenario persist, the premium could expand toward the $120 bull case.

North American producers benefit from the current elevated price regardless of which Q4 scenario unfolds. The WCS-WTI discount stood at $11 to $12 per barrel through early July, per Alberta Energy Regulator and BOE Report data, placing Canadian heavy oil at $72 to $74 per barrel on today's WTI price. That level remains above oil sands breakeven costs for major Alberta operators including Suncor Energy, Canadian Natural Resources, and Cenovus Energy.